Market Summary

Yield Movements

Between 1 September and 31 October, Malaysia's local currency (LCY) government bond yields increased an average of 12 basis points for maturities of 6 months and longer, driven by robust economic growth in the third quarter (Q3) of 2025. The economy rose 5.2% year-on-year, faster than the previous quarter's 4.4% year-on-year growth, buoyed by quicker expansions in the manufacturing and services sectors. Malaysia's robust economic growth was also supported by government incentive programs and investments in digitalization.

Local Currency Bond Market Size and Issuance

Malaysia's LCY bond market expanded 2.2% quarter-on-quarter (q-o-q) to MYR2.2 trillion in Q3 2025, extending the 1.9% increase in the second quarter (Q2) of 2025. Outstanding corporate bonds grew the fastest, recording 4.1% q-o-q in Q3 2025 after a 1.1% q-o-q rise in Q2 2025 as issuance increased during the quarter. On the other hand, outstanding Treasuries moderated to 0.9% q-o-q in Q3 2025 from 2.6% q-o-q in Q2 2025 due to maturities outpacing issuance during the period. LCY bond issuance surged 48.1% q-o-q in Q3 2025, reversing the 12.9% q-o-q contraction in Q2 2025 as Bank Negara Malaysia reduced the overnight policy rate to 2.75% on 9 July. Government bond issuance rose 40.0% q-o-q partly driven by borrowing to finance infrastructure investments and ongoing subsidies, while corporate bond sales soared 55.0% q-o-q, aided by incentives for sukuk (Islamic bond) offerings.

Sustainable Bond Market

Malaysia's sustainable bond market rose to USD17.3 billion on 8.3% q-o-q growth at the end of September, lifted by increased corporate bond issuance. Sustainability bonds continued to dominate outstanding sustainable bonds, accounting for 67.8% of the total. Over half (53.8%) of all corporate sustainable bonds had remaining maturities longer than 5 years, leading to a size-weighted average tenor of 6.5 years for the private sector. On the other hand, sustainable bonds issued by the public sector all carried tenors exceeding 5 years, resulting in a longer size-weighted average tenor or 12.8 years for the public sector.